I believe that defaults and losses on commercial real estate is the next shoe to drop alongside the continued troubles in residential real estate and other consumer related debt. The banks have had a window to raise capital and are working hard to earn themselves through these problems. The government has done a good job buying them time by holding interest rates down through their quantitative easing programs but there are cracks in the bathtub. The dollar has weakened, as it should, and long dates treasury yields are moving up sharply. This of course drives higher rates on mortgages which is a negative for the housing recovery.
This might well be the time to take advantage of the big bounce we have had in equities on hope that the recession is now over, as some are starting to call. Sorry, I don’t believe it. I believe this will be a long, drawn out recovery so keep your seat belts fastened.